The effects of the COVID-19 pandemic period on stock market return and volatility. Evidence from the Pakistan Stock Exchange.

The COVID-19 pandemic has emerged as a significant event of the current century, introducing substantial transformations in economic and social activities worldwide. The primary objective of this study is to investigate the relationship between daily COVID-19 cases and Pakistan stock market (PSX) return volatility. To assess the relationship between daily COVID-19 cases and the PSX return volatility, we collected secondary data from the World Health Organization (WHO) and the PSX website, specifically focusing on the PSX 100 index, spanning from March 15, 2020, to March 31, 2021. We used the GARCH family models for measuring the volatility and the COVID-19 impact on the stock market performance. Our E-GARCH findings show that there is long-term persistence in the return volatility of the stock market of Pakistan in the period of the COVID-19 timeline because ARCH alpha (ω1) and GARCH beta (ω2) are significant. Moreover, is asymmetrical effect is found in the stock market of Pakistan during the COVID-19 period due to Gamma (ѱ) being significant for PSX. Our DCC-GARCH results show that the COVID-19 active cases have a long-term spillover impact on the Pakistan stock market. Therefore, the need of strong planning and alternative platform should be needed in the distress period to promote the stock market and investor should advised to make diversified international portfolio by investing in high and low volatility stock market to save their income. This study advocated the implications for investors to invest in low volatility stock especially during the period of pandemics to protect their return on investment. Moreover, policy makers and the regulators can make effective policies to maintain financial stability during pandemics that is very important for the country's economic development.